“The money you have gives you freedom; the money you pursue enslaves you.” J. J. Rousseau
Years ago, when I was in college, I realized that some students were struggling with credit card debt. In fact, I had become a credit card victim myself in the last year of university period and learned how bad it was to have a credit card debt over my monthly budget. For 1 year, I had only been able to pay the lower limit of the credit card debt and witnessed a continuous increase in the credit card debt. I paid a lot of interest, the amount of money I paid increased all the time, however, I couldn’t close my debt. At that time, the laws on credit card use in Turkey were more flexible and the number of victims was higher. I was lucky to have taken an important lesson with a small amount of money. When we look at today, use of credit card and money has not changed much in general. In this article, I will share my concerns about the importance of financial literacy and the loss of money due to unnecessary expenses.
Contrary to common belief, the way to be financially happy is not about how much you earn, but how much you spend. This rule seems very simple, but it’s a rule that people can’t apply to their lives. Now let me ask you a question; consider one who earns $3000 and another who earns $8000. Which one do you think is economically more comfortable? At first glance, it may seem as if the person who earns $8000 can live more comfortably, but it depends on these conditions. If the person who earns $3000, needs $2000 in order to maintain his / her life, then he/she lives quite comfortably. On the other hand, a person with an income of $8000 may have a monthly credit debt more than his / her income, which will cost him/her a stressful life. I would like to give you a vivid example of the financial approach I found wrong; I witnessed a friend of mine purchased of a car by getting bank credit about 10 times his monthly salary. I used to think of it as a life choice. After, I took finance and economics lectures in my master’s, and in addition, after reading so many books about financial literacy, I understand that this is a wrong financial approach. Unfortunately, it’s a mistake many people can make. My friend in my example had to live and worked for 2.5 years in a place he hated. Because of his debt, he had to bear. But if he hadn’t gotten himself into debt on the first day, he’d be more courageous and would think about different possibilities. I don’t add to the main focus of this article borrowing money to earn income. It’s something totally different. If it is calculated correctly, it can be very profitable. The subject I’m focusing on is to take debts for just our enjoyment. We are obligated to work for others because of our debts, and we have to bear in a job we don’t like.
Let me give you another striking example of financial mistakes: I witnessed two people speaking on a train journey; the older one asked: “How much do you earn?” the answer was “1200 TL(Turkish Lira)” “SO, how did you get this phone?” younger one answered, “It was too easy, I will pay 300 TL each month for 12 months.” In this example, there is a young man who has borrowed money for a phone with a value of three times his salary. Maybe you thought about this example may have been exaggerated to you, but many people show similar behavior as this example in order to have different categories of products. What’s important here is to ask ourselves these questions, “Is it really necessary for us to get what we emotionally want to buy?” “Is there any more affordable product to buy?”. And we need to be able to answer these questions honestly and then make the most efficient decision for ourselves.
In today’s world, if the department we study at the university is not related to finance the education system doesn’t help us. Because it doesn’t include financial literacy. We are forced to start life without the knowledge that can help us about money. Robert Kiyosaki’s famous book, “Rich Dad, Poor Dad”, emphasizes that financial literacy is perhaps the most important issue to learn. Robert Kiyosaki is a writer I like to read about financial literacy education. “Rich Dad, Poor Dad” is the most popular best-selling book written in the field of financial literacy. Even if you’re not interested in money issues, I highly suggest you this book. In my next article, I will continue to focus on financial literacy and also will mention the concept of financial freedom.
K.